Brent rebounds from six-year low as OPEC meeting looms
NEW YORK (Bloomberg) -- Oil rebounded from the lowest price in more than six years in London as the Organization of Petroleum Exporting Countries prepares to meet on Friday.
Cash-strapped OPEC nations from Venezuela to Iran are piling pressure on Saudi Arabia to reduce oil output. Iran won’t accept any limit on its production below pre-sanctions levels, Oil Minister Bijan Namdar Zanganeh said. A report Saudi Arabia may propose an eventual OPEC production cut of 1 MMbpd is “baseless,” a Saudi official said on Thursday, asking not to be identified because the matter isn’t public.
"The idea that there may be an agreement is giving the market a bit of a lift," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. "Obstacles to an agreement to cut production appear insurmountable. We’re waiting to see the meeting fall apart tomorrow."
Oil prices have slumped about 40% since Saudi Arabia led the group’s decision last year to defend market share. The global surplus is worsening after data showed crude stockpiles in the U.S. expanded for a 10th week, keeping inventories above the five-year seasonal average and Russia continues to pump near record levels. OPEC nations remain divided over how to manage supplies and stabilize the oil market and it needs a consensus among all members before it can change its output target.
Price Gains
Brent for January settlement climbed 98 cents, or 2.3%, to $43.47/bbl at 9:26 a.m. on the London-based ICE Futures Europe exchange. The contract slid $1.95 to $42.49 on Wednesday, the lowest close since March 2009. Total volume was 55% above the 100-day average for the time of day.
West Texas Intermediate for January delivery rose 55 cents, or 1.4%, to $40.49/bbl on the New York Mercantile Exchange. It dropped $1.91 to $39.94 on Wednesday, the lowest close since Aug. 26. The U.S. benchmark crude traded at a $3.04 discount to Brent.
Saudi Arabia, OPEC’s most important member, may propose an eventual group production cut of 1 million barrels a day that may take effect in 2016, Energy Intelligence reported Thursday, citing a group delegate it didn’t identify. Such a cut would be conditional on the participation of non-OPEC producers including Russia, Mexico and Kazakhstan and wouldn’t be agreed on Friday, according to the report. The Saudi Arabian official said reports of a cut proposal were “baseless.”
Exceeding Target
OPEC’s 12 members have pumped more than their collective target of 30 million barrels a day the past 18 months, data compiled by Bloomberg showed.
“It’s not a matter of discussion with anyone to limit the level of production of Iran” below 4 million barrels a day, Zanganeh told reporters in Vienna. “After the full return of Iran to the market, we are ready to participate with OPEC members for making a new ceiling” on crude output, he said.
Iran, which pumped 2.8 MMbpd last month, according to a Bloomberg Survey, plans to boost supply by 500,000 bpd within weeks of sanctions being lifted and by 1 MMbbl months later.
Non-OPEC Supply
Russian oil output in November hovered near a post-Soviet record set the previous month. Production of crude and gas condensate averaged 10.779 MMbpd during the month, according to data from the Energy Ministry’s CDU-TEK unit, an increase of 1.3% from a year earlier. Russia’s strategy is to maintain its output, Energy Minister Alexander Novak said on Thursday in Moscow.
U.S. crude stockpiles increased by 1.18 MMbbl to 489.4 MMbbl last week, keeping inventories more than 120 MMbbl above the five-year seasonal average, Energy Information Administration data showed Wednesday.
